A gaming analyst said Tuesday he found “a strong correlation” between the increase in taxable sales in the Las Vegas area and gaming revenues produced by casinos catering to the locals customer.
Because of that relationship, Macquarie Securities gaming analyst Chad Beynon upgraded his opinion of Station Casinos parent, Red Rock Resorts, which is “best positioned to capitalize on an impressive Southern Nevada recovery.” Beynon said 90 percent of Clark County’s 2 million residents live within five miles of Red Rock Resorts property.
Chad Beynon
In a report to investors, Beynon said taxable sales in Clark County were up 7 percent in February to $227 million, the fifth consecutive month the figure has been above $200 million. Las Vegas is Clark County’s primary population center.
Management teams from several Southern Nevada casinos operators stressed the strength of the consumer and healthy economic fundamentals in Las Vegas and surrounding areas when discussing results for the quarter that ended March 31.
“After looking at the trends in the data, we believe Nevada taxable sales data supports this view, and do not seeing anything bucking this trend, at least in the medium term,” Beynon wrote. “Overall, we view this as a positive indicator for names with Nevada exposure.”
Red Rock Resorts and Boyd Gaming executives touted increases in population figures and continued job growth as reasons the companies business among Southern Nevada visitors continues to climb.
Boyd Gaming CEO Keith Smith told analysts in April that Clark County saw the second-highest population increase of any county in the nation. He said Southern Nevada’s 2.4 percent job growth rate over the last 12 months is well ahead of the national average and ranks Las Vegas in the top-10 for job growth among the nation’s largest metropolitan areas.
“The robust Southern Nevada economy continues to grow,” Smith said. “From a population perspective, Nevada grew more rapidly than any other state in the country in 2018.”
Red Rock Resorts CFO Stephen Cootey said earlier this month that wage growth had increased 3.6 percent over the 12-month period that ended in March, which attributed to an increase in discretionary spending by consumers, leading to a 7 percent increase in taxable sales for the last 12 months ending in January.
“This impressive economic backdrop, combined with very favorable supply/demand dynamics, a stable regulatory environment and the lowest gaming tax rate in the nation explain why we view the Las Vegas locals market as the most attractive gaming market in the United States,” Cootey said on the company’s first quarter earnings call.
Beynon said Macquarie upgraded Red Rock Resorts to an “Outperform” rating from a “Neutral” rating. Last year, Red Rock’s stock price was downgraded over concerns of construction disruptions at the company’s Palms and Palace Station casinos, which were undergoing a combined $810 million in upgrades.
“With the major projects nearing completion and free cash flow beginning to ramp, we are more constructive on shares,” Beynon said.
While taxable sales reached new highs in 2018, gaming revenues are still the pre-2007 recession peaks. Beynon said gaming numbers will bounce back as the Southern Nevada economy continues to improve,
“We believe the Las Vegas consumer, who was hit disproportionately harder from the Great Recession, still has a way to go to the upside,” Beynon said. “As the economy steadily grows, we expect consumers will have more discretionary dollars to direct towards gaming.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
